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"Ever wonder if City Council is as contentious and chaotic as it is sometimes portrayed? Here you can get a progressive perspective on some of the issues from someone who spent four years in the trenches. Totally unbiased, though!Feel free to comment but keep it respectful, just like they do at council."

Tuesday, September 25, 2012

Find the money!

Fontana to staff: “Seems you want me to find the money!”

That was the mayor’s assessment of the report delivered by
the new director of corporate investments and partnerships to the Investment
and Economic Prosperity Committee at its meeting this week.

Harvey Filger, newly hired three months ago to fill the job
that was created at the request of the mayor and council, the job of kick-starting
London’s economy so the mayor can fulfill his promise to create 10,000 jobs
over four or five years. That was two years ago, so there’s not much time left.

Filger had prepared a focussed but comprehensive report.
Entitled A Paradigm for Economic
Prosperity, it pointed out that the prosperity that London had enjoyed as a
result of the Auto Pact had been lost with globalization and NAFTA. Southwestern
Ontario, dependent on manufacturing, was hit especially hard by the recession
of 2008 that followed. “The estimated loss of payroll since 2007 in London is
approximately $1 billion,” the report states.

“A successful economic development strategy has to be based
on a realistic determination of the assets and liabilities of a community,” the
report continues. Taking that into account, it makes a number of recommendations:

Working with other levels of
government to make sure we get our fair share;

Cutting through red tape to
become more business friendly;

Defining objectives and
priorities for projects.

Filger had also reviewed the
proposals the committee had received over the summer. Generally, he felt, they fit
into four broad categories: strategic land acquisition to attract industry, a
clean and vibrant downtown, leveraged funds for targeted projects, a world
class transportation system.

None of this comes without investment
from the city, of course. So now came the hard part: where to find the money.

The city has limited ability to
raise funds. You can always ask the “higher” levels of government but they
usually want the municipality to put up some of the “seed” money. So where do
you get that?

There are only four ways to raise
money, Filger pointed out. You can increase taxes, you can reduce spending by
cutting services, you can borrow, you can sell off assets. That’s it. There is
no magic bullet, no money tree.

It’s not what the mayor wanted to
hear. He appreciated that Filger had "hit the high marks" from his objective
position of having only been in London for three months. But surely, somewhere
in his job description had been the words: “Find the money.”

“Seems to me you want me to find
the money,” Fontana grumbled. “So what are you going to do?”

He didn’t wait for a response. He
had an idea of his own. At the Finance and Administration Committee meeting the
previous week, the city had managed to borrow money, $70M to be exact, at 2.8%
interest. Interest rates were bound to be low for some time to come. He had
been discussing it with someone from the Bank of Canada. For sure the return on
investment would outstrip the borrowing costs. It wasn’t a bad option to look
at, he suggested. It just required a “paradigm shift.”

Indeed it would. City treasurer
Martin Hayward pointed out that investment requires upfront money while the
returns may be sometime in the future; the carrying costs and repayment of the
debt starts right away, however, and has to be factored into the next year's budget.

So how
are you going to pay for it until your ship comes in?

The city plans its projects and
debt issuance well into the future. It borrows when a capital project is
finished at a time when interest rates are favourable. That’s how it has
managed to keep its triple A rating. Once your borrowing gets out of whack with
your reserves, the interest rates go up. And borrowing as an investment carries
a certain amount of risk.

It’s not the first time the
Hayward has had to deliver this unwelcome news; it probably won’t be the last.

And you really can’t blame the
mayor for giving it another shot. After all, he has staked his reputation on a
zero per cent tax increase with no service cuts so he can’t go that route. He
had tried to sell off parts of London Hydro, but the community and council had
turned on him. Debt financing was all that was left, by Filger’s own account.

Councillor Stephen Full-time
Orser had missed the earlier part of the meeting and most, if not all, of the
presentation, but a couple of things in the report caught his eye.

This business of red tape; he
agreed that efforts should be made to reduce it locally, but what about the
other levels of government? How could they be made to do the same? How could provincial
and federal regulations be reduced? He was probably thinking about how to get around
the Environmental Site Assessment for the McCormick plant so that it could
quickly be handed over to one of the three investors who can’t wait to get
their bulldozers out there.

Even though the city is in competition
with other municipalities, Filger pointed out, they still have those regulations
in common which may affect their ability to compete with various US
jurisdictions. His best bet would be to work with other municipalities to lobby
the respective levels of government.

It’s not advice that is likely to
go far with Orser. To the best of my knowledge, despite a generous travel allowance, he doesn’t participate in the
Association of Municipalities of Ontario (AMO) or the Federation of Canadian
Municipalities (FCM) which offers such collaborative opportunities. Apart from the
occasional rendez-vous at the Harmony, he likes to go it on his own.

And what about selling off some
assets, some city property that wasn’t very productive, Orser wondered.

“There’s no money tree in the
back yard,” Filger informed him. “We could sell the least productive but they will
also be least attractive to an investor.”

There were a few other brief
comments. Paul VanMeerbergen liked the report. He found it realistic. He just
hoped that cutting through red tape wouldn't lead to another layer of bureaucracy
and more hiring. Matt Brown found it “brutally honest” and hoped that there
would be additional opportunity to engage the public as they went forward. Bud
Polhill liked the reference to the 401. “The 401 is where our future is,” he
proclaimed.

Visitor Paul Hubert too like the
frankness of the report and Filger’s suggestion that it provided the “smelling
salts” as an antidote to the “blue-sky thinking" that had been going on. Hubert
doubted they would be developing along the 401 anytime soon but a local businessman
and philanthropist, Mitch Baran, had made some suggestions for establishing a
presence there in the short term. And what about other parts of the city? What
about incentives for brownfield redevelopment like McCormicks?

The city had good brownfield
incentives already, director of planning and development John Fleming assured
him. As for the 401 and industrial land strategy, they were looking at land
needs and the possibility of adjusting the urban growth boundary for private
investors through the official plan review.

That should keep the landowners in
that area happy. But not as happy as they would be if the city were going to buy
the land.

Chairman Joe Swan tried to sum
up. There was a lot to do. They needed to come up with a source of funding.
They had to figure out how much they needed. They needed to identify and work
with other wealth generators like Tourism London and the London Economic
Development Corporation. And what about those job generating sectors like
education and health? There was a lot of work for the next 90 days.

But the sticking point will be
where to find the money. And whose job it will be to find it?

Staff has provided the options.
Choosing the source, that’s the job of council.

Found it at http://sire.london.ca/cache/2/cfffla452tbh5eaf4lphde55/6234609262012010614374.PDFIf that doesn't get you there, go to city hall meetings, plug in September 25 date and agenda for Investment and Economic Prosperity CommitteeRead the report and you'll be better informed than some councillors... sad, eh?